Vol II/April/2020

Foreword

Ever since the Novel Corona Virus (SARS-Cov-2 virus),
better known as COVID-19 virus, was discovered in
Wuhan, China earlier this year, countries all around the
globe have geared up to face one of the deadliest
outbreaks in recent years. The highly contagious virus has
now gained permanence as a pandemic and has estab-
lished itself globally with over 1.8 million confirmed cases
worldwide.
In order to prevent the spread of this virus and overbur-
dening healthcare systems, various countries have made
significant interventions, including the non-pharmaceu-
tical measure of social distancing. Social distancing
involves maintaining a physical distance between people
and reducing the number of times people come in
contact with each other. The idea behind social distanc-
ing is, by reducing the probability that a given uninfected
person will come into physical contact with an infected
person, the disease transmission can be suppressed,
resulting in fewer deaths.
Social distancing itself exists on a spectrum; it can be as
simple as avoiding crowded places or it can be
large-scale, such as the closure of schools and workplaces
and the cancellation of mass gatherings. As cases contin-
ue to rise rapidly, it is widely believed that basic social
distancing needs to morph into something stricter:
self-isolation, house quarantine, territorial quarantine,
and even lockdown. Enforcing these methods, however,
has proven to be complicated at best.
As we delve deeper, we start to see what was initially a
health crisis has now turned into an economic and social
crisis. The poor and marginalised are struggling to
comply with distancing policies, as it affects their daily
wages or their abilities to access food and basic supplies.
Mass unemployment, shutdowns, and drastic overall
slowdown has hit the global economy in ways countries
never predicted, and there is an urgent need to minimise
the impact caused by the pandemic.

In this newsletter, our team at Royston attempts to discuss how countries, especially Indonesia, are facing the
dilemma of public health vs. economic risks. We will also highlight the current social distancing controversies in
Indonesia, particularly their adamant refusal on establishing a total lockdown, and provide applicable and measura-
ble solutions to combat COVID-19. Lastly, this newsletter will take a brief look at India, and the impact of their
controversial nation-wide lockdown, as a comparative study.
Public Health Disaster vs. Economic Disaster:
The COVID-19 Dilemma

As number of positive cases worldwide approach nearly 2

million, countries are faced with an important question:
Is there a trade-off between battling COVID-19 and
protecting the economy? The answer is no, because
the two are intertwined.

Everyone agrees that saving lives is the utmost priority,

but in reality, disentangling public health and economic
considerations is extremely difficult and also futile,
because not only does fighting a virus and saving people
require big financial resources, it is inevitable that an
economic crisis will occur sooner or later. Furthermore,
policies focusing on containing the threat will still disrupt
the economy, and they will especially hurt the poor.

The irony is that economic decline itself has an adverse effect on health. A reduction in economic activity reduces the
circulation of money and, with it, tax revenues. This reduces the finances available for the public-health countermeasures
needed to control the pandemic. It also hits individuals and families, who may see their disposable income plummet.
Once they have depleted their financial reserves, companies close, with consequences for their owners, employees, and
suppliers.

Is there a win-win solution? Perhaps. Countries can balance public health and economic policies/stimuli to save lives, to
avoid as much suffering as possible for businesses and individuals, and to reduce long term damages. For that, it needs
to first acknowledge that the pandemic shouldn’t be viewed from a purely public health or economic perspective but
must be viewed within a human security framework which considers not just health and economic but also social factors.
While it is challenging, it is not impossible, and countries would do best to ponder over it.

“How Will We Eat?”: Implications of India’s National Lockdown – A Case Study.

The COVID-19 pandemic has hit India particularly hard. A

struggling economy to begin with, the country was
already tackling high unemployment, an unhealthy
banking sector, and lack of available health infrastruc-
ture.

In the early days of the outbreak, the government took a

mild approach and relied on thermal screenings at
airports, as opposed to mandatory 14-day quarantine
periods. As a result, foreigners who hid their symptoms to
avoid self-quarantine brought on the virus to the
second-most populated country in the world.

While the government tried to rectify their earlier blun-

der by cancelling visas, restricting flights, and imposing
curfews, cases had already multiplied at unprecedented
levels. Eventually, Prime Minister Narendra Modi declared
a 21-day nation-wide lockdown beginning from the 25th
of March 2020, the largest of its kind in the world.
This lockdown came as a shock to all parties; citizens were not prepared, and the central government did not coordinate
with regional governments. This inevitably resulted in chaos. In a country where temporary and internal migration is at
high levels, the lockdown resulted in large-scale, extreme reverse migration for citizens with low income and low job
security.

Perhaps the most threatening result was the acute and immediate shortage of food. 42% of people admitted that they
were running out of food. Migrant labourers had to return to their villages on foot, dying of starvation and exhaustion in
their journey.

The narrative had now changed; at first, people were dying of the virus, but now, people were dying of hunger. It is widely
believed that should the lockdown be extended, without massive intervention on the government’s part to alleviate the
peoples’ suffering, mass hysteria will ensue.

Recently, the Indian government issued fiscal and monetary policies in light of this lockdown. They have announced
relief packages in terms of food security, but the public distribution system is heavily burdened. In addition, direct cash
transfers, a raise in wages, relief for front-line workers like doctors and nurses have also been provided, but it doesn’t seem
enough given the population of the country. Financially speaking, the government is trying to inject liquidity in the econ-
omy, but only time will tell if it is working.

At this point, the government has three options to mull over. Firstly, they must focus on strengthening essential services
which includes providing medical personnel with more testing kits, PPEs, ventilators, and other medical equipment.
Secondly, the government must induce spending therefore focusing the effort to help the high-risk population. Lastly,
the government should consider extending the lockdown and preparing for the worst. While the lockdown can lead to
more chaos, it is also necessary for transmissions to be under control for as long as possible, until the government is fully
prepared to deal with the consequences.

COVID-19 in Indonesia: Is Invoking the Power of Prayer Enough?

Indonesia has come across as rather relaxed in their

approach towards curbing the COVID-19 pandemic.
In the early days of the outbreak, the Minister of
Health even urged citizens to pray fervently to avoid
the epidemic. This attitude has arguably resulted in
thousands of positive cases and one of the highest
mortality rates in Asia. Although the number of fatal-
ities currently is not particularly high when com-
pared to European countries, the ratio of deaths
when compared to infections is alarmingly steep. Fig 1. Indonesia’s COVID-19 deaths in comparison to other SEA countries.

While COVID-19 symptoms were being reported as early

as January, no positive cases were declared until nearly a
month later, and this has been attributed to the limited
capacity of government laboratories, inadequate testing
kits and false negatives. As the number of positive cases
continue to rise, the central government has come
under heavy criticism for failing to respond quickly. More
specifically, the government’s choice of opting for social
distancing rather than a complete lockdown has been
cited as weak and ineffective.

Fig 2. Rising number of positive cases in Indonesia, as per 9th of April.

From a public health perspective, the Indonesian health-
care system lacks the capacity to deal with a large-scale
outbreak such as this. Indicators include the availability
of ventilators in public hospitals, availability of personal
protective equipment (PPE), and availability of special-
ists vis-à-vis the number of patients. While the Indone-
sian healthcare system was already critical to begin with,
this pandemic has catapulted it to crisis levels. If the
government doesn’t impose strict measures, the
number of daily new cases could easily reach up to
60,000.
Fig 3. Estimated daily cases in a worst-case scenario.

Implications to the Country’s Economy

From an economic standpoint, the pandemic has put
Indonesia in a precarious position. GDP growth is expect-
ed to grind to a halt. Millions of people who have lost their
jobs will have to make their way back into the workforce.
Businesses will face a long road to recovery after having
been starved of revenue for an as yet unknown period of
time.
While it can be argued that nearly all countries are facing
similar problems, in Indonesia they are compounded by
the fact that the country runs one of the larger emerging
market current account deficits. As investors seek safer
harbours such as cash during these highly uncertain
times, capital outflows mean that countries like Indonesia
are hit particularly hard. This is evidenced by the depreci-
ation of the Rupiah within a single month, spiking to
nearly Rp 17,000 from a mere Rp 14,000.
The only silver lining is that competent people are in
charge of the most important economic institutions.
While the monetary side of things appears like it may be
stabilizing – thanks to aggressive interventions by Bank
Indonesia – the country still faces a massive challenge. No
matter what happens, Indonesia will require some
degree of fiscal stimulus to keep the economy running
until demand recovers.
In essence, the country is trying to fight off recession
using limited fiscal resources, with the possibility of a
liquidity crisis posing a looming threat. These fiscal
constraints and the state of the country’s capital markets
is believed to be the real reason why President Joko
Widodo is reluctant to impose a national lockdown. Given
that a majority of Indonesians in the informal sector
survive on subsistence wages, if a lockdown was imposed
and if they were to lose that income, the government
would be heavily burdened – Article 55 of the 2018 Law on
Health Quarantine stipulates that the central govern-
ment must shoulder the costs of basic needs for all
people and their pets and cattle in the affected area
during the lockdown period.
At this point, given the facts and the possible implica-
tions, it is natural for citizens to expect a powerful guiding
force in the form of the central government, but unfortu-
nately, delayed responses and overall confusion contin-
ues to hamper government efforts. The government did
propose random rapid diagnostic tests, instead of the
more beneficial and much preferred targeted testing on
high-risk categories, but by the time they did so, it was
too late. Hospitals were already filled to the brim with
mild, medium, and high-intensity cases. Healthcare
workers had already contracted the virus, and some had
even begun to die.

A Case of Poor Communication

Poor communication between the government and its
citizens is one of the biggest issues that occurred in Indo-
nesia. As the virus spread, so did misinformation, which
created an environment of fear and mistrust towards the
government.
Initially, citizens were not properly educated on what
social distancing actually meant, and those that did
understand sometimes had no other choice but to defy it
in order to make a living.
According to an online poll conducted by UNICEF
between 27-31 March via the engagement platform
U-Report on more than 7,000 young adults, more than
half (54%) said they have been outside their homes for
reasons other than shopping for food or seeking medical
treatment. About two-thirds (66%) said that people
around them are not keeping at least a one-metre
distance from each other.
This was evident, for instance, when the Jakarta local government decided to restrict availability of public transport to
curb transmissions. Rather than reduce crowds, extremely long queues and even greater crowds were observed, which
eventually led the them to scrap the plan. In short, chaos had already ensued.

Luckily, as of early April, President Joko Widodo finally declared a Large-Scale Social Distancing policy, locally abbreviated
as PSBB, to be accompanied by a civil emergency. The invoking of PSBB effectively rules out possibilities of a national or
even regional lockdown. Moreover, Widodo has stressed that regional governments aren't allowed to impose policies
that contradict the central government's directives. He stipulated 3 related regulations as a form of response to the
pandemic, namely:

Presidential Decree No. 11 Year 2020 on Stipulation of Public Health Emergencies for COVID-19, (“PP No.
11/2020”);
Government Regulation No. 21 Year 2020 on Large-Scale Social Limits in To Accelerate the Management of COV-
ID-19 (“PP No. 21/2020”); and
Government Regulation in Lieu of Law No. 1 Year 2020 on State Financial Policy and Stability of Financial
Systems for the Management of COVID-19 and/or Encounter the Threat to National Economy and/or Stability of
Financial Systems (“Perpu No. 1/2020”).

Perpu No. 1/2020 specifically regulates state financial

policies, taxation policies, national economic recovery
programs and financial system stability policies in connec-
tion with the management of COVID-19 pandemic and/or
facing threats that endanger the national economy and
financial system stability.

This regulation allows the government to increase spend-

ing even if it potentially triggers a deficit of more than 3
percent of the GDP. This flexibility applies only during the
COVID-19 emergency and its recovery period which spans
until the end of 2022. In addition, the government is
allowed to take cash from surpluses in certain budgets,
social funds, education funds, and funds raised by public
service agencies. The government may also issue recovery
bonds for private companies, SOEs, individuals and the
central bank as lender of last resort. While it may seem that
the central government is finally taking action, in reality,
the implementation of these regulations is unclear. In
order to declare PSBB, a regional government must get a
permit from the health minister. Not a single district
besides Jakarta has received approval from the health
minister till date. Meanwhile, despite the increasing
number of cases in Jakarta, people in the cities are still in
the ‘mudik’ mindset, not just because of the upcoming
Eid-al-Fitr celebrations, but also because they either have
recently been unemployed as a result of economic COV-
ID-19 implications or because they have to care for family
members living in their native villages. The return to rural
areas in large numbers could potentially cripple poorer
provinces unprepared to face the virus, given the disparity
of health services in these areas.

Should the issue escalate, and should regional govern-

ments deeply affected by the virus seek to impose a quar-
antine as opposed to PSBB, they would not have a strong
legal basis to do so. Moreover, the fact that they have to
request permission conflicts with regional autonomy regu-
lations.
 Identifying the Right Solution

In order to survive the COVID-19 pandemic as pain-

lessly as possible, Indonesia needs to be able to take a
multilateral approach that takes public health and
economy into consideration, without leaving out
social factors as well. It needs to acknowledge the
impact the virus has had on public health, the econo-
my, and the society as a whole.

The impact on public health is quite obvious and can

be measured by the number of deaths, number of
positive cases, number of recoveries, and so on.
Further impact can be seen in the devastation of the
fragile healthcare system, the depletion of medical
supplies and PPEs, the lack of fiscal and moral
support for medical personnel, the disparity of health
services and infrastructure between rural and urban
areas, the glaring differences in services provided by
private and public hospitals, and the overall burden
on national health insurance.

Meanwhile, the economic impact has already been

explained previously. The Indonesian Ministry of
Finance has also predicted Indonesia’s GDP growth
in 2020 to be between 0-2.5 per cent. Another way to
identify how the economy has been impacted is to
view it from three channels: supply, demand, and
confidence.

Supply: significant disruptions in the global supply chain, factory closures, cutbacks in many service sector activities.
Demand: a decline in business travel and tourism, declines in education services, a decline in entertainment and
leisure services.
Confidence: uncertainty leading to reduced or delayed consumption of goods and services, delayed or foregone
investment

The impact on society as a whole is less obvious. Indone-
sia needs to understand that crisis has always encour-
aged the emergence of profiteers. Lack of communica-
tion and governance has led to mass panic among
citizens, leading to conflict of interests and people seek-
ing to benefit from the difficult situation, for example,
the stockpiling of surgical masks and other protective
equipment. A gain for one is a loss for another, and in the
long run there is a strong possibility of people turning to
crime to have their needs met, particularly if the govern-
ment is not sensitive to their requirements.
Moreover, misinformation and hoaxes have exacerbated
the situation, leading to mistrust towards the govern-
ment, which could prove to be disastrous in the long run
as well.
Paranoia still exists among the masses as well, and when
combined with low morale and loneliness that stems
from self-isolation, can also impact mental health. Lower
income individuals and vulnerable societies may also feel
abandoned, especially if their financial and social needs
aren’t met. All in all, the social impact of this virus should
be given equal importance and must not be ignored.
After the impact is calculated, the government then
must set out to enforce comprehensive policies/stimuli to
ensure all factors are taken into consideration. To alleviate
the burden on the economy, for example, in the short
term, temporary direct economic assistance (direct
transfers)
low-income, vulnerable individuals who need safety nets like informal workers, daily wage workers, gigs economy,
culinary sectors to tide them over the loss of income from work shutdowns and layoffs is necessary, preferably using the
existing mechanism: BLT, JKN, BPJS Ketenagakerjaan. Governments can also consider relief packages, food rations,
advance wages, etc. as well. To achieve long-run growth, after the pandemic is over, the government can then imple-
ment counter cyclical monetary policies to boost aggregate demand and find a new opportunity in the global supply
chain. Examples of adequate policy responses include:

Stimulus Package 1: staple food, discount on airfare and hotel, subsidy for housing, Triple intervention by Bank Indo-
nesia (market intervention, lower interest rate, and lower reserve requirement).

Stimulus Package 2: relaxation on various taxes, promote net export performance by simplify the export-import
procedures.

Three-Pronged Approach to Managing COVID-19 in Indonesia

Direct transfer to vulnerable individuals.

Reduce interest rates and make borrowing easier and

promote spending.

Include more financing resources: effort should involve local,

Economic Policies global, multilateral, bilateral cooperation and should consider

use of swap lines, CMIM, or DDO.

International support from other countries. As Indonesia has

a good relationship with China, we can ask them to support
our actions to overcome the coronavirus and its economic
impact (e.g. in terms of paramedics).

Identify sources of misinformation and hoaxes and improve

communication efforts by introducing dedicated apps, updat-
ing official websites, and emphasising on spreading official
information via social media.

Strictly urge citizens not to panic and prevent stockpiling,

Social Policies especially for those hoarding surgical masks and sanitizers, or
important medical equipment.

Capitalise on social capital to leverage influence on the society

e.g. the influence of adat in Balinese society leading to an
extension of Nyepi.

Provide medical personnel with adequate PPEs, reliable

testing kits, ventilators, and welfare packages.

Ensure stable supply of medical equipment and protective

gear for the general public.
Public Health Policies
Co-operate with university laboratories rather than rely on the
Ministry of Health primary laboratory for testing.

Relocation based on vulnerabilities for people in slum areas to

contain the spread of the virus.
 CONCLUSION:

Indonesia has a long road ahead. It needs to learn from other countries on how to scale up public health measures to
save people’s lives first and to provide the right mix of economic stimulus. Careful, strategic decisions must be made
quickly, supported by strict enforcement across all levels of jurisdictions (national, provincial and district levels) along with
monitoring and evaluation. President Joko Widodo needs to establish himself as a capable leader and avoid giving mixed
messages. Economic assistance is necessary for citizens, especially the poorer ones, to survive in the cities and keep them
from returning to their native villages. Communication with the citizens must be improved, and a sense of urgency and
compliance must be advocated amongst those defying social distancing measures.

Should you have other queries regarding this newsletter, please do not hesitate to contact me directly via email at
aa@royston.id

References:

McKee, M., Stuckler, D. (2020). If the world fails to protect the economy, COVID-19 will damage health not just now but also in the
future. Retrieved from https://doi.org/10.1038/s41591-020-0863-y

Australian National University. (2020, April 8) [Webinar] Restricting human movements: public health outcomes and economic
consequences. Retrieved from https://indonesia.crawford.anu.edu.au/news-events/events/16402/restricting-human-
movements-public-health-outcomes-and-economic

Australian National University. (2020, April n.d.) [Webinar] Indonesia Project Global Seminar. Reading the Corona: extraordinary
responses during an extraordinary time. Retrieved from https://indonesia.crawford.anu.edu.au/news-events/podcasts/-
video/16366/indonesia-project-global-seminar-reading-corona-extraordinary